Screw Greece

[briansd1]

[quote=Jazzman]Brian, “a little more complex” … I’d say! I see Mr Papandreou is going for a referendum, which some say is political suicide and apparently jeopardizes the bailout. [/quote]

I think the referendum is brilliant on the part of Papandreou, from a domestic perspective. That will enable his party to survive.

From a Eurozone perspective, that’s bad.

There are no easy solutions from Greece other that Germans making good of the Greek debts as part of compensation for the Nazi invasion (many Greeks are arguing the the Germans owe them).

There is not much difference between the Greeks and American debtors who enjoyed a higher standard of living thanks to debts facilitated by fraud at different levels.

Greece is the poor cousin of Europe. Upon joining the Euro, they enjoyed the higher borrowing and purchasing power of the Euro — their standard of living was suddenly enhanced and they thought that was the new normal. But the Greeks didn’t do anything different in terms of reforms and productive capacity.

Now the debts are due and they have no way of paying back. Even if they return to the Drachma, they will still not have any way of paying back.

The Greeks need to get used to a lower standard of living. There’s no way around that.

Just like mortgage defaults caused the financial crisis of 2008, a Greek will cause a Eurozone crisis.

The problems in Europe are graver because of the political implications, the sovereignty issues, and the nationalistic sentiments.

[urbanrealtor]

Brian:
I agree with you.
And you know how much I hate that.

[Allan from Fallbrook]

[quote=urbanrealtor]Brian:
I agree with you.
And you know how much I hate that.[/quote]

Dan: Yeah, that smarts, don’t it? However, give the devil his due: He’s right.

This situation doesn’t have dick to do with democracy; it has everything to do with solvency. The ECB is essentially insolvent and is trying to buy time in order to shore up their balance sheet.

Much like the subprime contagion that blew a hole in the market in 2008, the fear here is the Greek mess goes viral and starts knocking down dominoes, starting with Portugal and Spain and then possibly moving up the chain into Italy and France. Given Greece’s relative puniness (financially speaking), you can see how large the problem might become if measures aren’t put into place to stop the rot.

The problem is that there is no upside for Greece and I cannot imagine how the EU “sells” this “solution” to a country and populace that have grown quite used to the status quo ante.

Maybe the Germans might want to try re-doing 1941 again and installing new “management” in Athens.

[briansd1]

[quote=Allan from Fallbrook]
The problem is that there is no upside for Greece and I cannot imagine how the EU “sells” this “solution” to a country and populace that have grown quite used to the status quo ante.[/quote]

The Greeks are like America homeowners who got used to their new houses. They can’t pay the mortgage but wish to remain in the houses.

Status quo ante when?

Greece joined the Euro in 2001. That’s the status quo ante they are heading back to.

The intrinsic economic problems of Europe are not any worse than America.

It’s mostly a political problem because they don’t have fiscal union, a common treasury and Euro bonds. Germans are not willing to pay back the debts of the Greeks.

In America, all Americans are on the hook for the debts of the whole country.

[Allan from Fallbrook]

[quote=briansd1]
Status quo ante when?

[/quote]

Brian: I wasn’t referring to when Greece went Euro, I was referring to the Greek system and way of life going back several decades.

They were living in an unaffordable social model and, you’re correct, they have no way of paying their (accumulated) bills. Pay close attention and there are some disturbing parallels to some other unaffordable pension/benefit models right here in the good, old USA. Like, California.

[briansd1]

[quote=Allan from Fallbrook]Pay close attention and there are some disturbing parallels to some other unaffordable pension/benefit models right here in the good, old USA. Like, California.[/quote]

That’s true. We can only kick the can down the road for so long.

But state and local governments will just cut back to meet their obligations — the citizens will suffer reduced services. I don’t think that municipal defaults in USA will have financial market implications like sovereign defaults in Europe.

[KSMountain]

[quote=urbanrealtor]Brian:
I agree with you.
And you know how much I hate that.[/quote]
I was just getting ready to type exactly this.

I am liking this new Brian that acknowledges reality and human nature, at least with respect to Greece…

[AK]

If I were Greek, I’d be overjoyed about having 50% to 60% of my foreign debt written off. That’s a substantially better deal than developing nations got in the Brady Bonds deal back in the ’80s.

[DomoArigato]

[quote=AK]If I were Greek, I’d be overjoyed about having 50% to 60% of my foreign debt written off. That’s a substantially better deal than developing nations got in the Brady Bonds deal back in the ’80s.[/quote]

I hope Greece repudiates all of its debts. There’s no reason for the people of Greece to pay the debts of the top 1%. What you are witnessing is democracy in action.

If this keeps up, I suspect we’ll see many more former ex-Government Sachs employees blow themselves up as they don’t know how to operate in an environment in which the government doesn’t continuously bail them out.

The bankruptcy of MF Global demonstrates that the 1% of crony capitalists in America are now subject to the same risks of economic losses as the other 99% of us. Led by former Goldman Sachs Chairman Jon Corzine, MF Global engaged in speculating on the bonds of Portugal, Italy, Greece, and Spain (PIGS) with shareholder money; they then tried to hedge their bets with derivatives called Credit Default Swaps (CDS). The firm relied on Corzine’s inside expectation that crony politicians in Germany and France would stick taxpayers with the cost of bailing-out bondholders, like MF Global. The bet buckled when voters rebelled and demanded bondholders suffer losses. Once subject to capitalist risks, MF Global collapsed.

http://biggovernment.com/cstreet/2011/11/02/corzine-firms-bankruptcy-reminds-us-dems-repealed-glass-steagall-opened-derivative-market/

[Allan from Fallbrook]

[quote=DomoArigato]Once subject to capitalist risks, MF Global collapsed.
[/quote]

And that’s the key to all of this, “Once subject to capitalist risks…”.

The bankers have managed to privatize gains (profits) and socialize losses (stick the taxpayers with the cost of bailouts). So, in truth, there really isn’t (for them) a “capitalist risk” at all, is there? There is just a rigged game, played by those in Big Money and their paid for politicians (GOP and Dem).

Hey, didn’t Goldman Sachs handle the underwriting for the Greek bonds issue? I might be wrong, but I remember hearing that somewhere.

[AK]

[quote=DomoArigato]There’s no reason for the people of Greece to pay the debts of the top 1%.[/quote]

The Greek public sector accounts for 40% of GDP, so it’s more like paying off the debts run up by the 99%.

[patientrenter]

[quote=Allan from Fallbrook]….So, in truth, there really isn’t (for them) a “capitalist risk” at all, is there? There is just a rigged game, played by those in Big Money and their paid for politicians (GOP and Dem)….[/quote]

Spot-on, Allan.

Can anyone tell the difference in how the Goldman Sachses of the world are being treated under Rubin/Greenspan/Paulson versus under Summers/Geithner/Bernanke?

These guys just switch the name plates on the doors as they rotate teams from Manhattan to Washington DC and back.

[briansd1]

IMHO, Greece is better off dealing with internal deflation while remaining part of the Euro and the European family.

Abandoning the Euro might feel good at first. But getting kicked out of the Euro will have long term ramifications in terms for prestige, national pride and well-being, and economic opportunities.

I believe that, long term, the bi-polority of America and China makes tighter European economic integration inevitable.

Long term, Greece wants to be part an economic union that includes rich countries of the north. Better than forever staying the poor cousin looking in.

[DomoArigato]

AK,

Why does it matter to you whether holders of Greek debt get a bailout? Did you make a bet that the EU would try and force Greek taxpayers to make good on that debt and lose?

[DomoArigato]

[quote=briansd1]
Long term, Greece wants to be part an economic union that includes rich countries of the north. Better than forever staying the poor cousin looking in.[/quote]

I disagree. Greece should default and then exchange the Euros of its citizens for a Greek-backed currency.

Default and currency-control is the path to prosperity (look at Argentina and Iceland) while austerity and being forced to pay back debt accrued by the top 1% is the path to country-wide depression (look at Ireland).

[Author]

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